Taxes When Living Aboard

[Julie Mor]

If you're a US citizen and have sold your home(s) to live aboard your boat and are not in the US for any part of a given year, do you still owe income taxes? This of course assumes you are still earning a normally taxable income from an entity based in the US.

[dwedeking2]

Not a tax lawyer but my understanding is:

- you have to be out of the country 330 days out of the year
- exclusion of foreign earned income up to something like $90k

Foreign Earned Income Exclusion

Your still liable for income earned in the US.

[deblen]

There has been a lot of news stories in the last yr. or so,regarding US citizens & dual citizens living outside US for many yrs. & not filing an annual US tx return,even though they haven't worked & earned anything in the States.Many,many situations here in Canada.
From what I gather,if you keep your US citizenship,you are reqd to file an annual return,even if it is nil & regardless of how long you've been gone.
I believe it's the same for Canadians also.
Check with IRS. Hope this helps. Cheers/Len

[Julie Mor]

I've been asked that question a few times and I've never been able to work my way far enough into the tax code to find an answer. Once I was asked if I was living abroad or on a boat while not in the US, would I have to pay taxes on my pension. Not sure we'd ever do it but if we did then I guess it would be time to ask the tax accountant.

[belizesailor]

Ultimately depends on your tax situation of course, but bottom line is that USA earned income from any source that is normally taxable or capital gains (whether USA or not) will almost certainly create a tax liability.

The Foreign Earned Income exclusion referenced above just applies to "ordinary income" (a paycheck for example). It does not exclude foreign earned capital gains (I know, I've paid them).

I have not lived in the USA since 2004. I don't go back often and just for a few days when I do. I was in the USA zero days in 2013, but still (in my case) had to file & pay USA taxes.

Your situation may differ so best to discuss with your accountant .

[belizesailor]

Interesting twist on the filing requirement. You are technically required to file, but if you had no taxable events for that year and did not owe taxes then there is no penalty.

Per my accountant who I asked for a friend who had not filed in years. In his case, his income was always below the foreign earned income exemption so he was OK.

[zeehag]

i receive ssdi.
i was advised last time i filed that i did no t need to file anymore ..YAAAAYYYYY!!!!
i have no other income.

[belizesailor]

Originally Posted by Julie Mor

I've been asked that question a few times and I've never been able to work my way far enough into the tax code to find an answer. Once I was asked if I was living abroad or on a boat while not in the US, would I have to pay taxes on my pension. Not sure we'd ever do it but if we did then I guess it would be time to ask the tax accountant.

For a normally taxable USA pension, I think the answer is "yes" regardless of how many days you've been outside the USA. Its not "foreign earned" income so not excluded under that rule.

[belizesailor]

Originally Posted by zeehag

i receive ssdi.
i was advised last time i filed that i did no t need to file anymore ..YAAAAYYYYY!!!!
i have no other income.

Don't think SSDI is taxable even if you are in the USA. Correct?

[jldunn86]

I was courious so I goggled it.

IRS Tax Tip 2013-24, March 1, 2013

Some people must pay taxes on their Social Security benefits. If you get Social Security, you should receive a Form SSA-1099, Social Security Benefit Statement, by early February. The form shows the amount of benefits you received in 2012.

Here are five tips from the IRS to help you determine if your benefits are taxable:
The amount of your income and your filing status affect whether you must pay taxes on your Social Security.
If Social Security was your only income in 2012, your benefits are probably not taxable. You also may not need to file a federal income tax return.
If you received income from other sources, then you may have to pay taxes on your benefits.
You can follow these two quick steps to see if your benefits are taxable:
Add one-half of the Social Security benefits you received to all your other income, including tax-exempt interest. Tax-exempt interest includes interest from state and municipal bonds.
Next, compare this total to the ‘base amount’ for your filing status. If the total is more than your base amount, then some of your benefits may be taxable.

The three 2012 base amounts are:

$25,000 for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year;

$32,000 for married couples filing jointly; and

$0 for married persons filing separately who lived together at any time during the year.
If you use IRS e-file to prepare and file your tax return, the tax software will figure your taxable benefits for you. If you file a paper return, you can use the Interactive Tax Assistant tool on the IRS website to check if your benefits are taxable. The ITA is a resource that can help answer tax law questions. There also is a worksheet in the instructions for Form 1040 or 1040A that you can use to figure your taxable benefits.
For more information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. You can get a copy of this booklet on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

[achil]

Originally Posted by Julie Mor

If you're a US citizen and have sold your home(s) to live aboard your boat and are not in the US for any part of a given year, do you still owe income taxes? This of course assumes you are still earning a normally taxable income from an entity based in the US.

Well, if you are earning an income from the US of course you need to file a return regardless of where you live. Check the link below from the FED.
Do You Need to File a Federal Income Tax Return?

[KDH]

A US citizen who resides outside the US, is required to file an income tax return whether or not the amount would normally be taxed inside the US. The US is one of only two or three countries that bases the requirement on citizenship rather than residency. Also, the US will not allow you to take the foreign income exclusion if you are not resident in a foreign country. Just moving from country to country as most cruisers do will not cut it. Find a reliable tax preparer before you leave and have them do the taxes and file for you or do the taxes yourself if you're daring and file them electronically if you can find a secure connection.

[denverd0n]

Originally Posted by jldunn86

Some people must pay taxes on their Social Security benefits.

This is true for Social Security retirement benefits. Social Security disability insurance (SSDI) is a different matter.

[cwyckham]

Originally Posted by deblen

There has been a lot of news stories in the last yr. or so,regarding US citizens & dual citizens living outside US for many yrs. & not filing an annual US tx return,even though they haven't worked & earned anything in the States.Many,many situations here in Canada.
From what I gather,if you keep your US citizenship,you are reqd to file an annual return,even if it is nil & regardless of how long you've been gone.
I believe it's the same for Canadians also.
Check with IRS. Hope this helps. Cheers/Len

No, not true of Canada or any other rational nation.

Most people on the thread have it right. The US is one of only two countries who tax based on citizenship, regardless of residency. The other is Eritrea!

You are treated in exactly the same way if you are living in the US or elsewhere, so the rules are the same. If you had to submit tax forms at home, then you have to when you're abroad. As has been noted, the foreign earned income exclusion sometimes helps and sometimes doesn't.

Even somebody born abroad to an American parent who has never seen the US needs to be putting their tax forms in.

The FBAR is important as well. If your accounts outside the US total over $10k then you also have to report the maximum amount in each foreign account every year (not just the ones over $10k).

If you decide you don't want to handle this on your own, I found Greenback Expat Tax Services: The Tax Experts! to be the most economical option for tax accountants. They specialize in expats and it's all handled online. Very professional.

[jmschmidt]

Wow! Very good answers. I can't find fault with any of it and I can add little else. I didn't see a specific reference but regarding the Foreign Earned Income (from a job or business, not investments) you still have to pay both FICA and Medicare but at the double rate as if you were a self-employed person at home. So you're looking at 16% or whatever it is now. The is also an exemption for "foreign living expenses" so you might be able to charge off some or most of the cost of maintaining your boat if you have a real job or a business. US citizens, Green Card holders and anyone else classified as a "US Tax Person" (look up the IRS definition) is required to file a US Federal tax return (and maybe state) unless you're below a certain earnings threshold, like your in poverty. Even if you renounce your US citizenship you are on the tax hook with the IRS for ten years. Didn't used to be that way. Dual citizenship will do you no good. Unlike most other countries, the US taxes us on our world-wide income from all sources. Don't cheat, or if you do, don't ever come back. Capt. Jack